Thursday, May 8, 2008

Meet Liu Keli, My New Neighbor

If you listen to the endless gloom and doom media and the economic populists running for President you would have to believe that the majority of Americans are in soup lines or selling pencils and apples down on the corner as tumbleweeds blow by. And populists, like their kin the conspiracy theorist, must have someone else to blame for any perceived woes. Often high on the list of culprits is China. To listen to Hillary and BXO you'd think trading with China has brought nothing but despair and agony to America. Of course reality is about 180 degrees from that, but they seem to be having fun with their fantasies so we'll just let them be for today.

Liu Kelli (pictured) is a successful businessman in Southeast China (Shanxi Province) where he runs plants that manufacture copper printing plates. In fact, Liu Kelli owns and runs about 100 manufacturing plants around the world employing 10,000 people. He wanted to get into the world's largest market, the United States, for the past couple years but didn't think that locating a business in the US could be profitable. Everyone knows it's cheaper to build things in China and send them to the US...right... right? Not so fast. He was persuaded to take a look at South Carolina by the Palmetto State's managing director for China trade, John Ling. He found the seven acres he needed in Spartanburg for a half million dollars. The same property in Shanxi Province would run him over $2 Million. His business requires lots of electricity though. What about that? Well, it turns out that power in Spartanburg is 75% cheaper than in China and has the added benefit of being 99.999% reliable-- no blackouts. (This is the same reason, by the way, that Google is building server farms in multiple Carolina locations-- reliable cheap power from Duke Power's nuclear and coal plants. We were pleasantly surprised moving from Gray Davis's brownouts in CA as well.) But the sticking point was labor costs. The state kicked in a $1,500/ year tax incentive per employee and the deal was done.

According to the LA Times, quoting Thomson Financial, China's overall investments in U.S. businesses rose to $9.8 billion in 2007, up from $36 million the year before. Meanwhile China's Ministry of Commerce reports that US investment in China was $2.6 billion last year, down from $3 billion in 2006. The LATimes article about Liu Keli is here.

While politicians continue to try to demonize free trade in this election year I'll just say, "Welcome to the neighborhood, Liu Keli. May your company expand a hundredfold in our beautiful state."

Capital flows where it's welcomed.